What do you need to do?
We are reminding dentists to ensure they check their pensions statements, to help confirm whether or not they have breached the pensions Annual Allowance, and consequently may have a tax charge to pay.
Pensions statements are usually sent out in October, and we know from speaking to dentists that many members are not aware of the information they should be receiving with respect to the Annual Allowance – more information is available for BDA members in our advice pages.
What is the BDA doing?
In November 2019, NHS England has announced that dentists will not be penalised for breaching the pensions Annual Allowance.
This announcement is a stopgap, and we will continue to seek a more definitive solution to be available from April 2020 onwards.
The message from NHS England, who are keen to encourage all clinicians to work without fear of Annual Allowance tax penalty, is: "Clinicians are therefore now immediately able to take on additional shifts or sessions without worrying about an annual allowance charge on their pension."
Although this is very welcome news, the fight is still not over. We are awaiting the full details from NHS England on the nature of their guarantee and we will continue to press them on this issue. We will keep BDA members informed of our progress.
Read our response to the DHSC consultation in November 2019 - we've made the case that all dentists undertaking NHS work should be able to access pensions flexibilities, so they do not face disincentives to treat more patients.
We have been driving some of the key developments within the NHS Pension Schemes to help dentists mitigate against facing a huge tax bill.
We have consistently raised the need for the NHS Pension Schemes to offer members a facility to voluntarily build up a lower level of pension in exchange for lower contributions.
What’s the issue?
For many higher-earners, the current system of taxing pension savings is being seen as providing an incentive to do less work, to seek early retirement or to withdraw from saving for retirement.
At present, the NHS Pension Schemes offer members a range of options to build up more pension than the standard amount, but no facility to build up a lower NHS Pension; other than for people who decide to periodically opt-in and out of pension saving.
In June 2019, the Department of Health and Social Care (DHSC) announced that they intend to consult on bringing in flexibility under the NHS Pensions Scheme in England and Wales.
However, this flexibility is initially targeted at higher-earning clinicians.
Secretary of State for Health, Matt Hancock made an announcement in over the amount they can put into their pension pots.
In response we wrote to Mr Hancock, and told him that dentists are also facing the same five-figure pension tax charges as our medical colleagues and that consistency is needed, and fast.
In September 2019, the DHSC launched a new consultation on three planned key new flexibilities for senior clinicians on taxes on pensions. If implemented, such staff would be able to choose at the start of the tax year how much their pension pot should grow by and adjust their contributions accordingly.
We await to see if dentists will be included in any of these proposals, and we remain concerned that by targeting access to flexibility, the DHSC is opening itself up to legal challenges from members who will not be able to access these flexibilities.
We continue to ask for a fairer deal for dentistry, no dentist should lose out on their pension simply for working hard to ensure NHS patients have been treated.
More information: FAQs
The current system for taxing pensions saving in the UK is incredibly complex. For dentists – and even financial advisors - the Annual Allowance and Lifetime Allowance rules are confusing and have left many dentists facing huge tax bills. Read our FAQs
for more information about the Annual Allowance and Lifetime Allowances, opting-out of the NHS Pensions Scheme, what happens if you are planning on retiring soon, potential changes to the tax system and the NHS Pension Schemes, and other useful information.
Despite all of the issues with pensions tax, it is important to remember two fundamental things – that saving into a pension scheme is a positive, and generally tax-efficient, way to provide financial security for old age; and that the NHS Pension Scheme remains among the best vehicles around offering guaranteed incomes and generous contributions from Governments.
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